Not Invented Here #6 - Housing

'Not Invented Here' syndrome is a term used about institutions which reject practical solutions because they originated from outside the in-group

This is the sixth in a series of articles about how ideological interest groups react when their institutional preferences are challenged by practical solutions.

Britain has a very low level of housing supply.

We have fewer housing units per 1,000 people than most OECD countries: England alone would need to build another 3.4 million homes just to catch up with the EU average. To make matters worse, the few housing units we have are also among the smallest in the OECD. This means that if you measured housing supply as the total residential floorspace per capita, we would be at the bottom of the OECD league table, or very close to it.

Britain also has very high housing costs, relative to income levels. We pay Swiss rents and mortgages, but we earn nothing like Swiss incomes.

I’ll go out on a limb here, and make the bold claim that those two facts – low supply, high prices – are not unconnected. Housing in Britain is expensive because there is so little of it.

Economists who specialise in the subject have been saying this for decades, in some cases many decades. Belatedly, that argument is now cutting through. In recent years, we have seen the emergence of a pro-development ‘YIMBY coalition’, consisting of people who, whatever else they may disagree on, agree that Britain needs to curb NIMBY power, and boost housing supply. YIMBYism is that rare thing in our politically hyper-tribal age: a cross-ideological coalition, in which the centre-left social democrat, the conservative, and the libertarian, can find common ground.  

The current government appears to share this diagnosis as well, although whether they will actually follow through with any meaningful action remains to be seen. But it is fair to say that YIMBYism is having a bit of a moment.

Not everybody likes it, though. The YIMBY coalition faces opposition from two sides. One side is the NIMBY side. That much is obvious, and requires no further elaboration.

But YIMBYism also faces opposition from some housing correspondents and housing campaigners, who also specialise on housing affordability. Logically, those people should be, at least broadly, on the same side as the YIMBYs. Logically, those people should be YIMBYs, at least of a sort. The reason why they are not brings us back to the theme of this article series: YIMBY solutions work, but they are “not invented here”.

Anti-YIMBYs are, to varying degrees, anti-market, or at least anti-housing-market. This can range from a preference for economic dirigisme to full-on Marxism. Examples for the dirigiste side include the former chair of the board of the campaign group Generation Rent, Ian Mulheirn, as well as the housing correspondent of The i newspaper, Victoria Spratt. On the trendy Marxist side of the spectrum, we have the writer, barrister and occasional Guardian contributor Nick Bano. Then there’s Guardian contributor Phineas Harper, who is… all over the place, but I guess somewhere in between, and closer to the Bano side. What unites them all is the insistence that housebuilding, or at least, private-sector housebuilding, has no effect on prices. We could build 5 million, 10 million, or 20 million new houses, and they would still cost the same. In other words, anti-YIMBYs believe that we could, in principle, create infinite levels of housing wealth. But also, that we should, for some reason, not do so.

The anti-YIMBYs never quite explain what they are basing this, let’s say, heterodox economic theory on. They merely keep saying that the conventional supply-and-demand framework is “simplistic” (it’s “just Econ101”, you see), and that the truth is “more complex and nuanced” than that. But they then never quite get round to explaining their complex and nuanced alternative to Econ101. Maybe it’s so complex and nuanced that it defies conventional forms of articulation.

What they do articulate, though, are their main preferred policy alternatives to supply-side reform, which are either rent controls, or social housing, or both.

Both of these are non-starters.

The case of rent controls is especially clear. Rent controls have been tried dozens of times around the world, and there are around 200 empirical studies on the subject. The vast majority of them show that they do more harm than good. They reduce the supply and the quality of rental housing, they reduce residential mobility, they lead to a misallocation of the housing stock, they drive up housing costs elsewhere in the sector, and they lead to a decline in construction rates. At this stage, given everything we know, a proponent of rent controls is to economics what Piers Corbyn is to epidemiology.

Social housing is more defensible. However, a specific lack of social housing cannot be the reason for Britain’s housing crisis, for the simple reason that there is no such specific lack. Britain has rather a lot of social housing. Social housing accounts for one in six housing units in the UK, which is more than twice the EU average. To secure affordable housing, a large social housing sector is neither necessary, nor sufficient. 

And it is certainly no substitute for a wider supply-side reform. This is because the current planning system does not, specifically, restrict the construction of social, or non-market housing. It restricts the construction of all housing, across the board. (And, of course, of offices, retail outlets, infrastructure, and pretty much everything else.) In the current system, arguing about whether we should build more market housing or more non-market housing is like people living under Prohibition arguing about whether it would be better to brew more ale or more lager.

Anti-YIMBYs are not NIMBYs. Anti-YIMBYs would not themselves actively campaign against development. So what motivates them?

For some, it is about sophistication-signalling. When anti-YIMBYs say that YIMBYism is “just Econ101”, they are completely right. It really is just that. It’s not a sophisticated argument, full of subtleties and nuances. It’s not an interesting or counterintuitive argument either. We just want to shift the supply curve to the right. That’s all. If you chose your political opinions in order to signal how clever and interesting you are, you would never become a YIMBY, because YIMBYism sends no such signal. It only has the advantage of being correct.

For others, it’s about anti-capitalism. YIMBYism is not, in itself, left-wing, right-wing, centrist or libertarian: it is compatible with a wide variety of political outlooks, and it currently seems to have the biggest traction on the centre-left. But there are some outlooks that it is not compatible with (or at least, I can’t see how). In particular, I have yet to see a socialist YIMBY. Socialists like to blame the housing crisis on “capitalism”, for the simple reason that socialists like to blame everything on capitalism. It is their One Big Idea, and in the case of housing, they’ve been doing it since 1872. Once you accept the validity of YIMBYism, though, you can no longer do that. You don’t have to become an out-and-out capitalist, but you have to accept that capitalism, whatever faults you may wish you attribute to it, is not to blame for the housing crisis.

Why does any of this matter?

I realise that this article looks weaker than the other ones in the Not Invented Here series, because while my fellow authors critique influential organisations that have the power to shape policy, I’m only taking potshots at a bunch of random journalists.

The reason why I bother doing this is that supply side denialism is not just harmless contrarianism or attention-seeking. Inane attempts “to own the YIMBYs” inevitably play into the hands of the NIMBY lobby, who will happily pick up these spurious pseudo-arguments, and use them for their own purposes. If supply is irrelevant anyway – where’s the harm in blocking a housing project? And then another one. And then another one. Let’s block everything! Supply doesn’t matter! Building stuff is just Econ101! You wouldn’t understand – it’s all Very Complex and Nuanced!

Except, it’s really not. It’s simple. It’s basic. It’s black and white. It’s an Occam’s Razor situation, where the Econ101 textbook is all you need to know, and everything else is counterproductive obfuscation.